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NAME:__________________________________________
Kim Yessamin Madarcos
GRADE/SECTION:______________________________
12 Copernicus

BUSINESS FINANCE
Quarter I – Week 2
Flow of Funds

CONTEXTUALIZED LEARNING ACTIVITY SHEETS

SCHOOLS DIVISION OF PUERTO PRINCESA CITY
Business Finance – Grade 12
Contextualized Learning Activity Sheets (CLAS)
Quarter I - Module 2: Flow of Funds
First Edition, 2021

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Development Team of the Contextualized Learning Activity Sheets

Writer: Yelainne C. Gabotero
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 Lesson 1
Flow of Funds

MELCS: Explain the flow of funds within an organization – through and from the enterprise—
and the role of the financial manager. (ABM_BF12-IIIa-5)
Objectives:
1. Define funds and cash flow
2. Identify what comprises cash flow
3. Illustrate the flow of funds within an organization – through and from the
enterprise
4. Explain the role of financial manager

Let’s Try
Directions: Read carefully each question. And write the letter of your answer on the
space provided before the number.

_______1.
B A statement reporting the impact of a firm’s operating, investing, and financing
activities on cash flows over an accounting period. What is it?
A. Balance Sheet
B. Statement of Cash flows
C. Statement of Financial Performance
D. Statement of Comprehensive Income

_______2.
A Which is an example of a cash inflow?
A. Acquiring a loan
B. Lending money to a borrower
C. Paying semi-annual interest for borrowing
D. Purchasing a brand-new accounting software

_______3.
D Which is an example of a cash outflow?
A. Acquiring a loan
B. Selling shares of stock
C. Decrease in accounts receivable
D. Paying the principal due on borrowings

_______4.
B These are activities on the cash flow statement that show results from any gains
(or losses) on amounts spent on investments in capital assets. What are these?
A. Financing activities
B. Investing activities
C. Investment in stocks
D. Operating activities

1
_______5.
A ________ is a type of financing where cash is borrowed from a lender at a fixed
rate of interest and with a predetermined maturity date. What is it?
A. Debt financing
B. Equity financing
C. Capital Structuring
D. Both Debt Financing and Equity financing

_______6.
D The following are roles of financial managers, except _________.
A. Cash management
B. Raising and allocating funds
C. Forecasting income and expenditures
D. Selecting, hiring and terminating finance staff

_______7.
C Bebenya is an employee of Fab and Glam Incorporated. She deals exclusively with
the company’s accounting and financial reporting. What is Bebenya’s role?
A. Cash Manager
B. Credit manager
C. Controller
D. Treasurer

_______8.
D Abby Marie is responsible for budgeting, projecting cash flows, and determining
how to invest and finance projects. Abby Marie’s position in the company is
_______.
A. Bank teller
B. Cashier
C. Cash officer
D. Financial Manager

_______9.
C How the responsibilities of a credit manager different from the responsibilities of
a cash manager?
A. A credit manager accounts for money coming in and going out, while cash
manager is responsible for overseeing the budgets and investments of the
company.
B. A credit manager formulates a cash strategy while a cash manager is responsible
for implementing the cash strategy.
C. A credit manager is responsible for collection of receivables while cash manager
accounts for money coming in and going out.
D. A credit manager accounts for the investments of the company, while a cash
manager is responsible for collecting bad debts.

_______10.
A Which of the following about the roles of a Financial Manager is FALSE?
A. He/She must be an expert at financial projections only
B. He/She uses a number of tools, such as setting the cost of capital (the cost of
money over time, which will be explored in further depth later on) to determine
the cost of financing.
C. He/She is responsible for knowing how much the product is expected to cost and
how much revenue it is expected to earn so that he/she can invest the
appropriate amount in the product.
D. The head of the financial department is the chief financial officer (CFO) who is
responsible for all financial decisions and reporting done in the company.

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 Let’s Explore and Discover
Unlocking of
Difficulties
A fund is a sum of
money that is made
for specific purpose.

Funds are also type

of financial
instrument where a
supply of capital
belonging to
numerous investors
is used to
collectively
purchase securities
while each investor
Cash Flow
retains ownership
Cash flow is the net amount of cash and cash equivalents being
and control of his
transferred into and out of a business.
own shares.
The statement of cash flows
Funds also means
working capital
➢ It reports a company’s cash inflows and outflows for a period.
which is the excess
of current assets
• Cash inflow – involves a receipt or cash collection. Most
over current
cash inflows are payments received from customer,
liabilities.
borrowings, investors who purchase company’s shares of
stock or equity from the company.
• Cash outflow – when a company pays cash to another
party. A payment for employees, suppliers, creditors and
purchasing long-term assets and investments or even a
payment for legal expenses and settlements.

➢ This is used by managers in evaluating past operations and in planning future

investing and financing activities.

➢ It is also used by external users such as investors and creditors to assess a

company’s profit potential and ability to pay its debt and pay dividends.

Statement of cash flows comprises the following:

➢ Operating activities - includes net income, depreciation, and changes in current

assets and current liabilities other than cash and short-term debt.

➢ Investing activities - includes investments in or sales of fixed assets and from

investments in the financial markets and operating subsidiaries.

➢ Financing activities - includes cash raised during the year by issuing short-term
debt, long-term debt, or stock. Also, since dividends paid or cash used to buy back
outstanding stock or bonds reduces the company’s cash, such transactions are
included here.
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 XXX Comp a n y
Cash Flow Statement
For the Year Ended December 31, xxxx

Ca s h F low f r om O p e r a tion s
Cash receipts from customers ₱ 86,772.00
Cash paid for merchandise ( 7,400.00 )
Cash paid for employees salary ( 53,000.00 )
Ne t Ca s h F low f r om O p e r a tion s ₱ 26,372.00
Ca s h F low f r om In ve s tme n t
Cash receipts from sale of property and equipment13,500.00
Cash paid for purchase of equipment ( 17,500.00 )
Ne t Ca s h F low f r om In ve s tin g ( 4,000.00 )
Ca s h F low f r om F in a n cin g
Cash receipt from loans 20,000.00
Cash for loan repayment ( 5,000.00 )
Ne t Ca s h F low f r om F in a n cin g 15,000.00
Ne t In cr e a s e /De cr e a s e in Ca s h ₱ 37,372.00
Sample Statement of Cash Flows

FLOW of Funds within an Organization

All business transactions include the exchange of value between two or more
parties which are measurable in terms of money particularly cash if not on credit or on
account. Companies will not be able to attain growth by offering on a cash basis only.
But to survive in the long run, there is a need to generate positive cash flows through
intensified collection of accounts or by ensuring that the company’s long-term cash
inflows exceed its long-term cash outflows.

The following diagram will show you the flow of funds within an organization.

Role of Financial Manager

One of the most important and complex activities of a firm is handling the financial activities
of the firm. The one who takes care of these activities is a financial manager who also
performs all the requisite monetary undertakings.

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A financial manager is a qualified person who does have a lot of experiences in handling all
the important financial functions of an organization. He or she should maintain far
sightedness in order to ensure that the funds are utilized in the most efficient manner. The
results of his or her actions will directly affect the profitability, growth, and goodwill of the
firm.

Types of Financial Manager

Each type of financial manager focuses on a particular area of management.

➢ Chief Accountant – prepares financial reports that summarize and forecast
the organization’s financial position and analyses of future earnings or
expenses.
- In-charge of preparing special reports required by governmental
agencies that regulates businesses.
- Oversee the accounting, audit, and budget departments
➢ Treasurers – direct organization’s budgets to meet its financial goals and
oversee the investment of funds
- Carry out strategies to raise capital and develop financial plans
for mergers and acquisition.
➢ Credit managers – oversee firm’s credit business. They set credit-rating
criteria, determine credit ceilings, and monitor the collections of past due
accounts.
➢ Cash Manager – monitor and control the flow of cash that comes in and goes
out of the company to meet the firms and investment needs.
➢ Chief Finance Officer – top executive and the highest level of financial
managers. Responsible for all of the financial reporting and accuracy of
information within the company.

Main Functions of a Financial Manager

1. Raising of Funds
In order to meet the obligation of the business, it is important to have enough
cash to maintain liquidity. Funds cab be raised by way of equity and debt, but
its ratio must be properly sustained. The maintenance of a good balance
between equity and debt is one of the responsibilities of a financial manager.

What is debt financing?

Debt financing a type of financing where cash is borrowed from a lender at a

fixed rate of interest and with a predetermined maturity date.

What is equity financing?

Equity financing a type of financing where a business cash is paid into the
business by investors, such as the business owner.

2. Allocation of Funds

Once the funds are raised through different channels, the next important
function is to allocate the funds. Allocation of funds should be made according
to its optimal use based in order of priorities. The best possible manner of
allocation of funds must consider the following points:
a. the fund requirements of the firm based on its growth capability
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 b. status of assets whether they are long term or short-term; and
c. mode by which the funds are raised.

A good asset mix and proper allocation of funds is one of the most important
financial activities as the decision will directly and indirectly influence other
managerial activities.

3. Profit Planning

Profit earning is one of the prime functions of any business organization. Profit
earning is important for survival and sustenance of any organization. Profit
planning refers to appropriate utilization of profits generated by the firm.

Profits are brought about by factors such as pricing, industry competition,

state of the economy, mechanism of demand and supply, cost and output.
Any increase in the profitability of the firm is due to proper utilization of
variable and fixed factors of production costs.

The use of fixed factors of production such as land and machinery results to
incurrence of fixed costs in the form of rent and depreciation expenses. If the
use of these factors of production will not be minimized, it will lead to a
reduction in profit.

4. Understanding Capital Market

A clear understanding of capital market is one of the important functions of a

financial manager. The trading of shares of stock of a company in the stock
exchange will involve a lot of risks. The finance manager is expected to realize
the calculation of the risk involved if ever a decision is arrived at in trading of
shares and other securities.

The investors’ share in profits of the company is distributed in the form of

dividends which will directly impact the operation of the capital market. If
dividends are not declared, the market price of the shares of stock in the stock
market will be lower while dividends declaration will tend to make the market
price a little higher. However, some companies try to retain accumulated
profits for expansion projects which make the shares of stock more attractive
to investors.

(Source: Angeles A. De Guzman. Business Finance for senior high school. Quezon City:
LORIMAR Publishing Inc., 2019, 8-10.)

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 Let’s Practice

Directions: On the following scenario, identify if the cash flows out or flows in. If the
scenario shows that cash flows out write OUT, if it is flows in write IN on the space
provided before the number.

_______1.
OUT Pay P5,000.00 car amortization.
_______2.
IN Received monthly gross salary of P15,000.00
_______3.
OUT Pay rent of P2,000.00 per month.
_______4.
IN Received commission from the sold property.
_______5.
OUT Pay for grocery.
_______6.
OUT Watched a movie with a friend costs P500.00.
_______7.
IN Cebu Pacific released dividend for the stocks you bought a year ago.
_______8.
IN The guest you toured around the city gives you P1,000.00 as a tip.
_______9.
OUT You bought your mom a birthday present.
_______10. It is your birthday! Your godmother gives you a cash gift.
IN

Directions: Identify each scenario if what activity it categorized into. Write OA if it is an

operating activity, FA if it is a financing activity and IA if it is an investing activity. Write
your answer on the space provided before the number.

_______1.
OA Cash payments for purchases of merchandise.
_______2.
IA Cash receipts from a sale of stock.
_______3.
IA Cash payments for equipment
_______4.
OA Cash receipts from sales of goods.
_______5. Cash dividends paid to shareholders.
FA
_______6.
OA Cash payments for employees’ salaries.
_______7.
FA Cash payments to lenders for interest on loans
_______8.
OA Cash receipts from collection of borrowing made to other entities.
_______9.
FA Cash receipts from issuance of bonds
_______10.
OA Cash receipts from collection of interest on loans made by other entities.

Tracking business cash is important so that you do not get to the end and find that
expenses outstripped income. Agree or disagree? ____________________
AGREE

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 Let’s Do More

Directions: Below are roles of different individuals in an organization. Identify each role if it is
for finance manager or not. If a role stated is for finance manager put √ and x if it states
otherwise. Write your answer on the space provided before the number.

_______1. Develops marketing plans of the firm.

_______2. Raise financial resources of the firm.
_______3. Plans where to borrow cash for finances.
_______4. Making investment decisions.
_______5. Hires employees and trains them.
_______6. Transact inside and outside non-financial activities of the firm.
_______7. Utilize profits generated by the firm
_______8. Designing stage for product launching
_______9. Maximize wealth of the firm
_______10. Record and taking minutes of the meeting.

Directions: Act as a finance manager and supply answer on every questions below.

Raise funds
Where will you get funds for next week, debt or income? _________________.
Income.
How much is it? _________________
55,000
Allocate funds
Allocate that budget for that week (where will it go?)
__________________________________
Example: Transportation – P 2,800.00 __________________________________
__________________________________
Rent - 5,000 __________________________________
__________________________________
Foods -25,000 __________________________________
__________________________________
Appliances -5,000 __________________________________
__________________________________
Designs - 2,000 __________________________________
Does it have a surplus/excess? ________________________________
Excess -18,000
Profit planning
If there is, what are your plan to utilize that excess and a make a profit from it?
____________________________________________________________________________________
Since I used income, I will donate the 5,000 for the fundraising I helped and use the
____________________________________________________________________________________
remaining 13,000 to build a small shop to sell baked sweets to earn more money and
use it for the next fundraising.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________

Do you think good financial ability of an individual makes him/her prosper? Why?
____________________________________________________________________________________________
Yes, since financial competence empowers people to make better decisions with their
____________________________________________________________________________________________
money and improve their lives. Financial capacity refers to the ability to handle money
____________________________________________________________________________________________
effectively on a daily basis as well as through major life events such as having a child,
____________________________________________________________________________________________
getting divorced, or relocating.

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 Let’s Sum It Up
Directions: Complete the sentences by filling the blanks with the correct answer.

__________
Funds means working capital which is the excess of current assets over current
liabilities. The Statement of Cash Flow reports the cash ___________
inflows and __________
outflows for a
period. It comprises three (3) activities which are ________________________,
operating activities
_____________________,
investing activities and ___________________.
financing activities
financial manager
A _____________is a qualified person who does have a lot of experiences in handling all
the important financial functions of an organization. The main functions are
______________________________________,
raising of funds _________________________________,
allocation of funds
_________________________________
profit planning and __________________________________.
understanding capital market.

Let’s Assess

Directions: Read carefully each question. And write the letter of your answer on the
space provided before the number.

_______1.
B A statement reporting the impact of a firm’s operating, investing, and financing
activities on cash flows over an accounting period:
A. Balance Sheet
B. Statement of Cash flows
C. Statement of Financial Performance
D. Statement of Comprehensive Income

_______2.
D An example of a cash outflow is:
A. Acquiring a loan
B. Selling shares of stock
C. Decrease in accounts receivable
D. Paying the principal due on borrowings

_______3.
A A type of financing where cash is borrowed from a lender at a fixed rate of interest
and with a predetermined maturity date:
A. Debt financing
B. Equity financing
C. Capital Structuring
D. Both Debt Financing and Equity financing

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_______4.
D Abby Marie is responsible for budgeting, projecting cash flows, and determining
how to invest and finance projects. Abby Marie’s position in the company is:
A. Bank teller
B. Cashier
C. Cash officer
D. Financial Manager

_______5.
C How the responsibilities of a credit manager different from the responsibilities of
a cash manager?
A. A credit manager accounts for money coming in and going out, while cash
manager is responsible for overseeing the budgets and investments of the
company.
B. A credit manager formulates a cash strategy while a cash manager is
responsible for implementing the cash strategy.
C. A credit manager is responsible for collection of receivables while cash
manager accounts for money coming in and going out.
D. A credit manager accounts for the investments of the company, while a cash
manager is responsible for collecting bad debts.

_______6.
A An example of a cash inflow is:
A. Acquiring a loan
B. Lending money to a borrower
C. Paying semi-annual interest for borrowing
D. Purchasing a brand-new accounting software

_______7.
B These are activities on the cash flow statement that show results from any gains
(or losses) on amounts spent on investments in capital assets:
A. Financing activities
B. Investing activities
C. Investment in stocks
D. Operating activities

_______8.
D The following are roles of financial managers, except _________.
A. Cash management
B. Raising and allocating funds
C. Forecasting income and expenditures
D. Selecting, hiring and terminating finance staff

_______9.
C Bebenya is an employee of Fab and Glam Incorporated. She deals exclusively with
the company’s accounting and financial reporting. What is Bebenya’s role?
A. Cash Manager
B. Credit manager
C. Controller
D. Treasurer

_______10.
A Which of the following about the roles of a Financial Manager is FALSE?
A. He/She must be an expert at financial projections only
B. He/She uses a number of tools, such as setting the cost of capital (the cost of
money over time, which will be explored in further depth later on) to determine
the cost of financing.
C. He/She is responsible for knowing how much the product is expected to cost
and how much revenue it is expected to earn so that he/she can invest the
appropriate amount in the product.
D. The head of the financial department is the chief financial officer (CFO) who
is responsible for all financial decisions and reporting done in the company.
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 Answer Key

Let’s Try
1. B 2. A 3. D 4. B 5. A 6. D 7. C 8. D 9. C 10. A

Let’s Practice
Activity 1: Activity 2:
1. OUT 1. OA
2. IN 2. IA
3. OUT 3. IA
4. IN 4. OA
5. OUT 5. FA
6. OUT 6. OA
7. IN 7. FA
8. IN 8. OA
9. OUT 9. FA
10. IN 10. OA

Let’s Do More
Activity 1 Activity 2
1. X 6. X ANSWER VARIES.
2. √ 7. √
3. √ 8. X
4. √ 9. √
5. X 1O. X

Let’s Sum It Up
Activity 1:
Funds means working capital which is the excess of current assets over current liabilities. The Statement of
Cash Flow reports the cash inflows and outflows for a period. It comprises three (3) activities which are
operating activities, investing activites, and financing activities.

A financial manager is a qualified person who does have a lot of experiences in handling all the important
financial functions of an organization. The main functions are raising of funds, allocation of funds, profit
planning and understanding capital market.

References
Book

De Guzman, Angeles A. Business Finance for senior high school. Quezon City: LORIMAR
Publishing Inc., 2019

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